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TMI Blog1975 (2) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of section 61-A of the Indian Sale of Goods Act, realised and also paid the prices as increased by such duty on such goods and entered those sums in a separate account named "Pakistan Duty Account" in which there was a credit balance of Rs. 2,68,543-6-3 at the end of 2005 R. N. year, but the assessee did not bring those sums in its profit and loss account in those years. Some time after 2005 R. N. year the assessee closed its business in Pakistan and thereafter in 2011 R.N. year distributed the said amount among the partners due to the retirement of one of its partners. The Income-tax Officer included the said amount as the income of the assessee in 2011 R.N. year by rejecting the plea of the assessee, namely, that those sums were not its income of that year in the following terms : " A reference to books and records shows that the assessee realised the so-called duty from foreign buyers on jute consigned to them and hence the amount forms a part and parcel of the sale proceeds. Keeping the amount in a separate account does not alter its nature. The duty was realised after partition. Admittedly, there has been no claims from the Pakistan Government in respect of the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years relating to R.N. 2004 and 2005, but we are not impressed by it, for no such finding has been made either by the Appellate Assistant Commissioner or by the Tribunal. In the Privy Council case [1933] 1 ITR 94 (PC) the assessee was a money-lender and kept his books on a hybrid system. His practice was to enter all sums received by him from his debtors in a deposit register without allocating them either to interest or to principal and thereafter in the subsequent years, by treating certain portions of those sums as his income, he used to apportion them towards interest and the balance towards principal. In those circumstances it was held by the Judicial Committee that the sums appropriated towards interest by the assessee were rightly treated as the income of the assessment year, at page 101 of the report, in the following terms : " What the officer is directed to compute is not the assessee's receipts but the assessee's income and in dubio what the assessee himself chooses to treat as income may well be taken to be income and to arise when he so chooses to treat it. " In the Privy Council case the assessee received those amounts in a lump sum as a creditor from his d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entirely different. The three payments of interest to which I have referred were payments of interest as such...... and...... no book-keeping can ever alter the nature of that payment. " The assessee before us was not the creditor of his customers and as already stated it had received those sums as its trading receipts in those earlier years. Hence, those trading receipts were not the income of the assessee in the assessment year. Therefore, it is no longer open to the revenue authorities to include those sums as the income of the assessee in the assessment year under consideration. Further, by keeping those sums in its " Pakistan Duty Account " and outside its profit and loss account of those earlier years and therefter by distributing them to its partners the assessee cannot alter the nature and the quality of those receipts, for in Debaprasanna's case [1951] 20 ITR 293 (Cal), at page 305 of the report, the learned Chief Justice has said that the assessee had no powers to change the nature of those receipts " by treating them as being payments into a suspense account...... He had received these amounts--all of them--by 4th January, 1930, and they should have been assessed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that case appears to me to be as far from the present case as any case can possibly be. A trading receipt, in its nature a trading receipt at the moment of receipt, naturally fell to be brought into the accounts for tax purposes. How that can lend any support to the proposition that a receipt which in its nature never was a trading receipt can, years after, by some alteration in the accounts of people who received it, become a trading receipt, I am quite unable to follow. " (Italics is for emphasis). Where the books are kept on a cash basis the income is assessed on the actual receipts, but where they are kept on a mercantile system the income is assessed at the point of accrual of the income and not when the money is actually received by the assessee. In the absence of a contract to the contrary, the price of goods, under section 64-A of the Sale of Goods Act, is liable to be increased or decreased according to the duty levied on the goods after the making of the contract. What the seller in such a case receives is the increased price of the goods and not any tax, for he is not a tax collector. The entire sum is a trading receipt in his hands and he cannot split it for the pur ..... 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